Smart cards are credit card sized devices with on-board computer chips that provide the ability to carry digital cash on the chip and with the card. Smart cards are extremely convenient in certain payment systems, such as self service vending, because they eliminate the need for immediate cash, and they also eliminate associated problems like making change, processing coins, as well as the potential for vandalism and fraud.
To use a smart card in a vending application, a customer inserts the card into a card reader, typically located at or nearby the vending equipment site. The card must be authorized within the particular electronic payment system associated with the card in order to transfer electronic cash. The chip on the smart card and the chip on the reader execute a series of communication protocols to establish card authenticity, card I.D. number, and available stored cash value. Once this verification is completed, the reader removes the appropriate amount of stored value from the card in a single price application, or in a multiple price application, the customer selects a product or service, and the appropriate stored value amount is removed from the chip's memory.
The electronics for removing stored values from a smart card is relatively straightforward, but adding value is more complex because it requires a source of available funds from which to draw. In point of service applications, two methods are commonly employed to add funds The first requires a customer to add cash to a smart card reader at a value added terminal. The value added terminal then transfers value onto the card equivalent to the amount of cash inserted into the terminal. A disadvantage of this system is that it involves cash, which creates the possibility of vandalism, theft and fraud.
A second system utilizes a customer's pre-existing bank account. With this system, a customer uses a bank card or an ATM card, rather than cash, to access funds to be added to the smart card. An internal transaction processing modem, such as those used for retail point of sale check out counters, performs a standard process of gaining approval for the fund transfer. The transaction is completed usually by batching together a number of similar transactions. Once the charge or debit authorization is obtained, the terminal then adds the stored value to the smart card.
While this account-to-card process eliminates cash from the process, it has two drawbacks. One, a transaction processing modem is required, which can be an expensive piece of equipment, usually several hundred dollars, and there is additional telephone line expense, which can be justified for large volume sales operations, but for many small scale retail operations can be cost prohibitive. Second, not all potential customers have bank accounts with associated credit cards or debit cards.
It is an object of the present invention to provide a cashless means for handling self-service transactions that is easy for customers to use and relatively inexpensive for businesses to install and maintain.